Greece, creditors close in on debt cut deal

Fri Jan 20, 2012 9:30am EST
 
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By George Georgiopoulos and Sophie Sassard

ATHENS/LONDON (Reuters) - Greece was closing in on an initial deal with private bond holders on Friday that would prevent it from tumbling into a chaotic default but lose investors up to 70 percent of the loans they have given to Athens.

The agreement, to be followed up by technical talks over the weekend, could come later in the day, sources close to the negotiations said.

Private bondholders would most likely incur a real loss of 65 to 70 percent, with the new bonds having a 30-year maturity and offering a progressive coupon, or interest rate, averaging out at 4 percent, a banking official close to the talks told Reuters.

Cash-strapped Greece is fast running out of time as it pushes to wrap up an agreement by Monday paving the way for a fresh injection of aid before 14.5 billion euros ($18.5 billion)of bond repayments fall due in March.

"There could be a pre-agreement tonight, but technical discussions with the lawyers will likely continue over the week-end and next week," another source close to talks said, adding that involving the ECB in the deal was also discussed.

"We expect them to make an effort as well. It could be through a special deal, as you would expect for a body like the ECB," the source said.

After a breakdown in talks last week over the coupon, or interest payment, that Greece must offer on its new bonds raised fears of a disastrous bankruptcy, the two sides resumed negotiations on Thursday.

Charles Dallara, who negotiates in the name of the private bondholders through the International Institute of Finance, will meet with senior Greek officials later in the day, Finance Minister Evangelos Venizelos said after concluding a first round of talks in the morning.   Continued...